FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended May 4, 2002
Commission file number 001-13143
BJ'S WHOLESALE CLUB, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-3360747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mercer Road
Natick, Massachusetts 01760
(Address of principal executive offices) (Zip Code)
(508) 651-7400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__.
---
The number of shares of the Registrant's common stock outstanding as of June 1,
2002: 71,223,058
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Thirteen Weeks Ended
-----------------------------------------
May 4, May 5,
2002 2001
---------------- ----------------
(Dollars in Thousands except Per Share Amounts)
Net sales $ 1,260,108 $ 1,134,172
Membership fees and other 31,697 27,861
---------------- ----------------
Total revenues 1,291,805 1,162,033
---------------- ----------------
Cost of sales, including buying and occupancy costs 1,158,156 1,041,161
Selling, general and administrative expenses 91,859 84,680
Preopening expenses 3,298 278
---------------- ----------------
Operating income 38,492 35,914
Interest income, net 251 1,424
Loss on contingent lease obligations (1,417) -
---------------- ----------------
Income before income taxes 37,326 37,338
Provision for income taxes 14,272 14,375
---------------- ----------------
Net income $ 23,054 $ 22,963
================ ================
Net income per common share:
Basic $ 0.32 $ 0.32
================ ================
Diluted $ 0.32 $ 0.31
================ ================
Number of common shares for earnings per share computations:
Basic 71,347,192 72,623,411
Diluted 72,525,150 74,283,486
The accompanying notes are an integral part of the financial statements.
-2-
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED BALANCE SHEETS
May 4, February 2, May 5,
2002 2002 2001
-------------- -------------- ---------------
(Unaudited) (Unaudited)
(Dollars in Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 40,132 $ 87,158 $ 87,327
Accounts receivable 49,250 61,027 47,443
Merchandise inventories 607,601 560,001 518,216
Current deferred income taxes 28,239 27,226 7,814
Prepaid expenses 16,607 17,406 15,542
-------------- -------------- ---------------
Total current assets 741,829 752,818 676,342
-------------- -------------- ---------------
Property at cost:
Land and buildings 460,804 449,619 385,318
Leasehold costs and improvements 77,489 74,647 67,251
Furniture, fixtures and equipment 385,463 369,671 335,393
-------------- -------------- ---------------
923,756 893,937 787,962
Less: accumulated depreciation and amortization 274,607 259,562 247,973
-------------- -------------- ---------------
649,149 634,375 539,989
-------------- -------------- ---------------
Property under capital leases 3,319 3,319 3,319
Less: accumulated amortization 2,489 2,447 2,323
-------------- -------------- ---------------
830 872 996
-------------- -------------- ---------------
Deferred income taxes 9,593 12,571 -
Other assets 21,402 21,248 19,765
-------------- -------------- ---------------
Total assets $ 1,422,803 $ 1,421,884 $ 1,237,092
============== ============== ===============
LIABILITIES
Current liabilities:
Accounts payable $ 396,279 $ 381,112 $ 342,459
Accrued expenses and other current liabilities 153,066 166,183 136,559
Accrued federal and state income taxes 27,734 33,352 16,802
Obligations under capital leases due within one year 299 285 245
Contingent lease obligations due within one year 45,400 44,068 -
-------------- -------------- ---------------
Total current liabilities 622,778 625,000 496,065
-------------- -------------- ---------------
Obligations under capital leases, less portion due
within one year 1,485 1,558 1,769
Contingent lease obligations, less portion due
within one year 57,445 62,142 -
Other noncurrent liabilities 49,202 46,617 42,681
Deferred income taxes - - 7,799
Commitments and contingencies - - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01, authorized 20,000,000
shares, no shares issued - - -
Common stock, par value $.01, authorized 180,000,000
shares, issued 74,410,190 shares 744 744 744
Additional paid-in capital 67,505 68,574 71,656
Retained earnings 753,905 730,851 671,491
Treasury stock, at cost, 3,198,232, 2,816,753 and
1,641,142 shares (130,261) (113,602) (55,113)
-------------- -------------- ---------------
Total stockholders' equity 691,893 686,567 688,778
-------------- -------------- ---------------
Total liabilities and stockholders' equity $ 1,422,803 $ 1,421,884 $ 1,237,092
============== ============== ===============
The accompanying notes are an integral part of the financial statements.
-3-
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
------------------------
May 4, May 5,
2002 2001
---------- ----------
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 23,054 $ 22,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on contingent lease obligations 1,417 -
Depreciation and amortization of property 17,253 14,775
(Gain) loss on property disposals (19) 14
Other noncash items (net) 49 32
Deferred income taxes 1,965 (233)
Tax benefit from exercise of stock options 844 9,431
Increase (decrease) in cash due to changes in:
Accounts receivable 11,777 7,807
Merchandise inventories (47,600) (22,931)
Prepaid expenses 799 425
Other assets (184) (5,577)
Accounts payable 15,167 7,399
Accrued expenses (2,663) (534)
Accrued income taxes (5,618) (15,005)
Contingent lease obligations (4,782) -
Other noncurrent liabilities 2,585 (1,772)
---------- ----------
Net cash provided by operating activities 14,044 16,794
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property additions (42,473) (41,266)
Proceeds from property disposals 53 -
---------- ----------
Net cash used in investing activities (42,420) (41,266)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of capital lease obligations (59) (54)
Proceeds from issuance of common stock 969 7,130
Purchase of treasury stock (19,560) (15,669)
---------- ----------
Net cash used in financing activities (18,650) (8,593)
---------- ----------
Net decrease in cash and cash equivalents (47,026) (33,065)
Cash and cash equivalents at beginning of year 87,158 120,392
---------- ----------
Cash and cash equivalents at end of period $ 40,132 $ 87,327
========== ==========
Supplemental cash flow information:
Interest paid, net of capitalized interest $ (36) $ (15)
Income taxes paid 17,925 29,613
Noncash financing and investing activities:
Treasury stock issued for compensation plans 2,901 20,496
The accompanying notes are an integral part of the financial statements.
-4-
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Additional Total
Common Stock Paid-in Retained Treasury Stock Stockholders'
-------------------------- ---------------------------
Shares Amount Capital Earnings Shares Amount Equity
------------ ------------ ------------ ------------- ------------ -------------- -------------
(In Thousands)
Balance, February 3, 2001 74,410 $ 744 $75,583 $648,528 (1,947) $ (59,940) $664,915
Net income - - - 22,963 - - 22,963
Issuance of common stock - - (3,927) - 666 20,496 16,569
Purchase of treasury stock - - - - (360) (15,669) (15,669)
------------ ------------ ------------ ------------- ------------ -------------- -------------
Balance, May 5, 2001 74,410 $ 744 $71,656 $671,491 (1,641) $ (55,113) $688,778
============ ============ ============ ============= ============ ============== =============
Balance, February 2, 2002 74,410 $ 744 $68,574 $730,851 (2,817) $(113,602) $686,567
Net income - - - 23,054 - - 23,054
Issuance of common stock - - (1,069) - 72 2,901 1,832
Purchase of treasury stock - - - - (453) (19,560) (19,560)
------------ ------------ ------------ ------------- ------------ -------------- -------------
Balance, May 4, 2002 74,410 $ 744 $67,505 $753,905 (3,198) $(130,261) $691,893
============ ============ ============ ============= ============ ============== =============
The accompanying notes are an integral part of the financial statements.
-5-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the quarter ended May 4, 2002 are not necessarily indicative
of the results for the full fiscal year or any future period because, among
other things, the Company's business, in common with the business of retailers
generally, is subject to seasonal influences. The Company's sales and operating
income have historically been strongest in the fourth quarter holiday season and
lowest in the first quarter of each fiscal year.
2. The interim financial statements are unaudited and reflect all normal
recurring adjustments considered necessary by the Company for a fair
presentation of its financial statements in accordance with generally accepted
accounting principles.
3. These interim financial statements should be read in conjunction with the
consolidated financial statements and related notes in the Company's Annual
Report on Form 10-K for the fiscal year ended February 2, 2002.
4. The components of interest income, net were as follows (amounts in
thousands):
Thirteen Weeks Ended
--------------------
May 4, May 5,
2002 2001
------- -------
Interest income $ 251 $ 1,424
Capitalized interest 163 128
Interest expense on debt (116) (75)
Interest on capital leases (47) (53)
------- -------
Interest income, net $ 251 $ 1,424
======= =======
5. The following details the calculation of earnings per share for the periods
presented below (amounts in thousands except per share amounts):
Thirteen Weeks Ended
--------------------
May 4, May 5,
2002 2001
------- -------
Net income $23,054 $22,963
======= =======
Weighted-average number of common shares
outstanding, used for basic computation 71,347 72,623
Plus: Incremental shares from assumed
exercise of stock options 1,178 1,660
------- -------
Weighted-average number of common and
dilutive potential common shares outstanding 72,525 74,283
======= =======
Basic earnings per share $ 0.32 $ 0.32
======= =======
Diluted earnings per share $ 0.32 $ 0.31
======= =======
-6-
Options to purchase a total of 747,550 shares at a weighted-average exercise
price of $45.35 were outstanding at May 4, 2002, but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares for the quarter
then ended.
6. In the fiscal quarter ended May 4, 2002, the Company recorded a pretax
accretion charge of $1,417,000 and made payments totaling $4,782,000 in
connection with its obligations for House2Home, Inc. ("House2Home") leases. The
payments included lump sum settlements for three leases. As of May 4, 2002, the
Company has reserved a total of $102,845,000 associated with its obligations for
38 remaining House2Home leases. Both BJ's and House2Home (formerly HomeBase,
Inc.) were part of Waban Inc. ("Waban") prior to 1997 and were part of The TJX
Companies, Inc. ("TJX") prior to 1989. In connection with the spin-off of Waban
from TJX in 1989, Waban agreed to indemnify TJX against any liabilities TJX
might incur with respect to these leases. Pursuant to a subsequent agreement,
BJ's agreed to indemnify TJX for 100% of House2Home's lease liabilities
guaranteed by TJX through January 31, 2003 and for 50% of any such liabilities
thereafter. House2Home filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code on November 7, 2001. For additional information, refer to
BJ's filing on Form 10-K for the fiscal year ended February 2, 2002.
7. Provisions of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," and Emerging Issues Task Force
Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer,"
became effective at the beginning of 2002. The adoption of these standards did
not have a material impact on the Company's results of operations, financial
position or cash flows, or produce any major changes in current disclosures.
SFAS No. 143, "Accounting for Asset Retirement Obligations," addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The Company is in the process of evaluating the requirements of SFAS No.
143, which becomes effective in 2003.
8. On June 12, 2002, the Company terminated its previous bank credit agreement,
which was due to expire on July 9, 2002, and entered into a new $200 million
unsecured credit agreement with a group of banks which expires June 13, 2005.
The agreement includes a $50 million sub-facility for letters of credit. The
Company is required to pay an annual facility fee which is currently 0.175% of
the total commitment. Interest on borrowings is payable at the Company's option
either at (a) the Eurodollar rate plus a margin which is currently 0.575% or (b)
a rate equal to the higher of the sum of the Federal Funds Effective Rate plus
0.50% or the agent bank's prime rate. The Company is also required to pay a
usage fee in any calendar quarter during which the average daily amount of loans
and undrawn or unreimbursed letters of credit outstanding exceeds 33% of the
total commitment. The usage fee, if applicable, is currently 0.125%. The
facility fee, Eurodollar margin and usage fee are subject to change based upon
the Company's fixed charge coverage ratio. The agreement contains covenants
which, among other things, include minimum net worth and fixed charge coverage
requirements and a maximum funded debt-to-capital limitation. The Company is
required to comply with these covenants on a quarterly basis. Under the new
credit agreement, the Company may pay dividends or repurchase its own stock in
any amount so long as the Company remains in compliance with all other
covenants.
-7-
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (First Quarter) Ended May 4, 2002 versus Thirteen Weeks Ended May
5, 2001.
Results of Operations
Net sales for the first quarter ended May 4, 2002 rose 11.1% to $1.260 billion
from $1.134 billion reported in last year's first quarter. This increase was due
to the opening of new stores, a comparable store sales increase of 4.0% and an
expansion in the number of gas stations in operation from 35 at the end of last
year's first quarter to 57 at May 4, 2002. Total revenues in the first quarter
included membership fees of $29.0 million versus $25.2 million in last year's
first quarter. This year's results benefited from increases in the membership
fee for Business and Inner Circle members from $35 to $40, effective January 1,
2001.
Cost of sales (including buying and occupancy costs) was 91.91% of net sales in
this year's first quarter versus 91.80% in the comparable period last year. This
increase in percentage was due primarily to a combination of increased occupancy
costs as a percentage of sales and a decrease in overall gross merchandise
margin caused by a shift in the sales mix to below-average-margin consumables
this year. This year's cost of sales included additional capacity costs at the
Company's new Burlington, New Jersey, cross-dock facility, which replaced a
smaller facility in April 2001.
Selling, general and administrative ("SG&A") expenses were 7.29% of net sales in
the first quarter versus 7.47% in last year's comparable period. This percentage
decrease was attributable mainly to effective expense control and the timing of
certain advertising costs.
Preopening expenses were $3.3 million in the first quarter this year compared
with $0.3 million in last year's first quarter. The Company opened four new
clubs in this year's first quarter. No new clubs were opened in last year's
first quarter.
Operating income in the first quarter rose to $38.5 million, an increase of 7.2%
over last year's first quarter operating income of $35.9 million.
Interest income, net was $0.3 million in this year's first quarter versus $1.4
million in the comparable period last year. This decrease was due to
significantly lower interest rates, which reduced income from invested cash, as
well as lower average cash balances.
During the first quarter, the Company recorded a pretax accretion charge of $1.4
million ($0.9 million after-tax, or $.01 per diluted share) associated with its
obligations for House2Home, Inc. leases. This charge is recorded on the "Loss on
contingent lease obligations" line in the statement of income. Both BJ's and
House2Home (formerly HomeBase, Inc.) were part of Waban Inc. ("Waban") prior to
1997 and were part of the TJX Companies, Inc. ("TJX") prior to 1989. In
connection with the spin-off of Waban from TJX in 1989, Waban agreed to
indemnify TJX against any liabilities TJX might incur with respect to these
leases. Pursuant to a subsequent agreement, BJ's agreed to indemnify TJX for
100% of House2Home's lease liabilities guaranteed by TJX through January 31,
2003, and for 50% of any such liabilities thereafter. House2Home filed for
bankruptcy under Chapter 11 of the United States Bankruptcy Code on November 7,
2001.
-8-
The Company's first quarter provision for income taxes was 38.2% of pretax
income this year versus 38.5% last year. Excluding the loss on contingent lease
obligations, the Company's pretax income rate in this year's first quarter was
38.3%, the same rate used for the full fiscal year last year.
Net income in this year's first quarter was $23.1 million, or $.32 per diluted
share, versus $23.0 million, or $.31 per diluted share, in last year's first
quarter.
The Company expects to continue to benefit from the membership fee increases
noted above, although that benefit should diminish over the course of the year
as the Company cycles through the accounting impact of the fee increases.
Because members renew throughout the year and because membership fee income is
realized over the life of the membership, the benefit of the fee increases is
spread over a two-year period. The Company expects that this benefit will be
partially offset by increases in the costs of employee medical benefits and
property insurance over the remainder of the year. Interest income is projected
to be lower than last year, particularly in the second quarter, when interest
rates are expected to be well below last year's rates.
In 2001, all new clubs were opened in the second half of the year. A more evenly
distributed schedule of new club openings in 2002 is expected to create uneven
quarterly comparisons in preopening and advertising expenses throughout the
year. These costs, taken together, are projected to be higher than last year in
the second quarter and lower than last year in the third and fourth quarters.
The Company has begun testing pharmacies in the three new Atlanta clubs which
opened at the end of the first quarter and in one existing Massachusetts club,
which was retrofitted for this business. Plans are in place to expand this test
in two additional existing clubs and in two more Atlanta clubs expected to open
before the end of the year. Because Atlanta is a market where BJ's has no other
clubs, very limited name recognition and two entrenched competitors, the Company
is also testing a program of free first-year memberships during the preopening
and initial opening periods of the new Atlanta clubs.
In the second quarter, the Company plans to roll out a new BJ's co-branded
MasterCard(R) underwritten by a major financial institution on a non-recourse
basis. Purchases made at BJ's with the co-branded MasterCard will earn a 1.5%
rebate. All other purchases with the BJ's MasterCard will earn rebates of 0.5%
or 1.0%, based on certain factors. Rebates up to $500 per year will be issued in
the form of BJ's Bucks(R) certificates redeemable for merchandise at any BJ's
club.
The Company operated 134 clubs on May 4, 2002 versus 118 clubs on May 5, 2001.
Seasonality
The Company's business, in common with the business of retailers generally, is
subject to seasonal influences. The Company's sales and operating income have
historically been strongest in the fourth quarter holiday season and lowest in
the first quarter of each fiscal year.
-9-
Recent Accounting Standards
Provisions of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," and Emerging Issues Task Force
Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer,"
became effective at the beginning of 2002. The adoption of these standards did
not have a material impact on the Company's results of operations, financial
position or cash flows, or produce any major changes in current disclosures.
SFAS No. 143, "Accounting for Asset Retirement Obligations," addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
Company is in the process of evaluating the requirements of SFAS No. 143, which
becomes effective in 2003.
Liquidity and Capital Resources
Net cash provided by operating activities was $14.0 million in the first quarter
of 2002 versus $16.8 million in last year's comparable period. Cash provided by
net income before depreciation and amortization and before the post-tax loss on
contingent lease obligations was $41.2 million in the first quarter of 2002
versus $37.7 million in last year's comparable period.
Cash expended for property additions was $42.5 million in the first quarter of
2002 versus $41.3 million in the first quarter of 2001. The Company opened four
new leased clubs and purchased one existing club, which was previously leased,
in this year's first quarter. No new clubs were opened in last year's first
quarter; however, all twelve of last year's scheduled new clubs were under
construction and the relocation of the Company's cross-dock facility to
Burlington, New Jersey, was completed during last year's first quarter. Two new
gas stations were opened in the first quarter of this year versus one last year.
The Company's full-year capital expenditures are expected to total approximately
$180 million in 2002, based on plans to open approximately 13 or 14 new clubs
and 20 to 25 gas stations. The Company expects to own approximately three of the
new club locations opening in 2002 and also plans to spend approximately $10 to
$15 million in 2002 for clubs that will open in 2003, as well as some initial
capital for a third cross-dock facility scheduled to open in Florida in the
spring of 2003. The timing of actual club openings and the amount of related
expenditures could vary from these estimates due, among other things, to the
complexity of the real estate development process.
During the first quarter of 2002, the Company repurchased 453,000 shares of its
common stock for $19.6 million, or an average price of $43.18 per share. From
the inception of its repurchase activities in August 1998 through May 4, 2002,
the Company has repurchased a total of $245.6 million of its common stock at an
average price of $32.44 per share. The Company's remaining repurchase
authorization was $54.4 million as of May 4, 2002.
On June 12, 2002, the Company terminated its previous bank credit agreement,
which was due to expire on July 9, 2002, and entered into a new $200 million
unsecured credit agreement with a group of banks which expires June 13, 2005.
The agreement includes a $50 million sub-facility for letters of credit. The
Company is required to pay an annual facility fee which is currently 0.175% of
the total commitment. Interest on borrowings is payable at the Company's option
either at (a) the Eurodollar rate plus a margin which is currently 0.575% or (b)
a rate equal to the
-10-
higher of the sum of the Federal Funds Effective Rate plus 0.50% or the agent
bank's prime rate. The Company is also required to pay a usage fee in any
calendar quarter during which the average daily amount of loans and undrawn or
unreimbursed letters of credit outstanding exceeds 33% of the total commitment.
The usage fee, if applicable, is currently 0.125%. The facility fee, Eurodollar
margin and usage fee are subject to change based upon the Company's fixed charge
coverage ratio. The agreement contains covenants which, among other things,
include minimum net worth and fixed charge coverage requirements and a maximum
funded debt-to-capital limitation. The Company is required to comply with these
covenants on a quarterly basis. Under the new credit agreement, the Company may
pay dividends or repurchase its own stock in any amount so long as the Company
remains in compliance with all other covenants. The Company is in compliance
with the covenants and other requirements set forth in its credit agreement.
BJ's has no credit rating triggers that would accelerate the maturity date of
debt if borrowings were outstanding under its credit agreement.
The previous bank credit agreement also contained a $50 million sub-facility for
letters of credit, of which $2.3 million was outstanding at May 4, 2002. The
Company also maintains a separate $41 million facility for letters of credit,
primarily to support the purchase of inventories, of which $11.8 million was
outstanding at May 4, 2002, and an additional $20 million uncommitted credit
line for short-term borrowings.
Increases in inventories and accounts payable from May 5, 2001 to May 4, 2002
were due mainly to the addition of new clubs. Increases in inventories and
accounts payable since February 2, 2002 were due primarily to normal seasonal
requirements and the addition of new clubs. Increases in deferred tax assets
since May 5, 2001 of last year were attributable primarily to the recording of
related liabilities for lease indemnification obligations in the third quarter
of last year.
Payments that the Company makes to settle its lease indemnification obligations
will reduce operating cash flows in varying amounts over the remaining terms of
the House2Home leases, which expire at various times up to 2016. During this
year's first quarter the Company made payments totaling $4.8 million in
connection with these obligations. The payments included lump-sum settlements
for three leases. As of May 4, 2002, the present value of the Company's
obligations for 38 remaining House2Home leases totaled $102.8 million, including
$45.4 million classified as current liabilities. This reflects the fact that
BJ's is responsible for 100% of House2Home's lease liabilities through January
31, 2003 and the assumption of a certain average time period before sublease
income begins to be realized. BJ's and TJX share equal responsibility for
House2Home's leases after January 31, 2003. The Company may satisfy its
obligations through additional lump-sum settlements, which could accelerate the
timing of cash outflows. The Company believes that these payments will not have
a material impact on its future financial condition or cash flows and that the
liabilities recorded in the financial statements adequately provide for its
indemnification obligations. However, there can be no assurance that the
Company's actual liability under the TJX indemnification agreement will not
differ materially from amounts recorded in the financial statements due to a
number of factors, including future economic factors which may affect the
ability to successfully sublease the House2Home properties.
-11-
The following summarizes the Company's contractual cash obligations as of May 4,
2002 and the effect these obligations are expected to have on its liquidity and
cash flows in future periods (in thousands):
Contingent
Capital Operating Lease
Payments Due by Period Total Leases Leases Obligations
---------------------- ----- ------ ------ -----------
May 2002 to April 2003 $ 138,140 $ 451 $ 92,289 $ 45,400
May 2003 to April 2005 224,498 912 196,952 26,634
After April 2005 1,282,670 912 1,250,947 30,811
---------- ---------- ---------- ----------
$1,645,308 $ 2,275 $1,540,188 $ 102,845
========== ========== ========== ==========
Cash and cash equivalents totaled $40.1 million as of May 4, 2002 and there were
no borrowings outstanding on that date. The Company believes that its current
resources, together with anticipated cash flow from operations, will be
sufficient to finance its operations through the term of the new credit
agreement, which expires June 13, 2005. However, the Company may from time to
time seek to obtain additional financing.
Factors Which Could Affect Future Operating Results
This report contains a number of "forward-looking statements," including
statements regarding membership fee income, employee medical benefit costs,
property insurance costs, interest income, and preopening and advertising
expenses, planned capital expenditures, planned store and gas station openings,
lease obligations under the Company's indemnification agreement with TJX, and
other information with respect to the Company's plans and strategies. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "estimates," "expects" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause actual events or the Company's
actual results to differ materially from those indicated by such forward-looking
statements, including, without limitation, economic and weather conditions and
state and local regulation in the Company's markets; competitive conditions; the
Company's success in settling lease obligations under the Company's
indemnification agreement with The TJX Companies, Inc.; and events which might
cause the Company's 1997 spin-off from Waban Inc. not to qualify for tax-free
treatment. Each of these and other factors are discussed in more detail in the
Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2002.
Any forward-looking statements represent the Company's estimates only as of the
day this quarterly report was first filed with the Securities and Exchange
Commission and should not be relied upon as representing the Company's estimates
as of any subsequent date. While the Company may elect to update forward-looking
statements at some point in the future, the Company specifically disclaims any
obligation to do so, even if its estimates change.
Quantitative and Qualitative Disclosures About Market Risk
The Company believes that its potential exposure to market risk as of May 4,
2002 is not material because of the short contractual maturities of its cash and
cash equivalents. No bank debt was outstanding at May 4, 2002. The Company has
not used derivative financial instruments.
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PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
At the 2002 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") held on May 23, 2002, the re-election of directors Ronald R.
Dion, Lorne R. Waxlax and Edward J. Weisberger for three-year terms
ending in 2005 and approval of an amendment to the Company's 1997
Stock Incentive Plan to increase the number of shares that may be
issued under the Plan by 2,000,000 shares were acted upon by the
stockholders of the Company.
The number of shares of common stock outstanding and entitled to vote
at the Annual Meeting was 71,246,351.
The results of the voting on each of the matters presented to
stockholders at the Annual Meeting are set forth below:
Votes Votes Votes
For Withheld Against Abstentions
--- -------- ------- -----------
Ronald R. Dion 58,274,378 821,075 N/A N/A
Lorne R. Waxlax 58,251,564 843,889 N/A N/A
Edward J. Weisberger 58,265,204 830,249 N/A N/A
Approval of Amendment to
1997 Stock Incentive Plan 50,324,879 N/A 8,129,532 641,042
The other directors of the Company, whose terms of office as directors
continued after the Annual Meeting, are S. James Coppersmith, Kerry L.
Hamilton, Bert N. Mitchell, John J. Nugent, Thomas J. Shields and
Herbert J. Zarkin.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 BJ's Wholesale Club, Inc. 1997 Stock Incentive Plan, as
amended.
10.2 Credit Agreement, dated June 12, 2002 among the Company
and certain banks.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K with the
Securities and Exchange Commission during the quarter ended May
4, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BJ'S WHOLESALE CLUB, INC.
-------------------------
(Registrant)
Date: June 17, 2002 /s/ JOHN J. NUGENT
---------------------------- ------------------
John J. Nugent
President and Chief Executive Officer
(Principal Executive Officer)
Date: June 17, 2002 /s/ FRANK D. FORWARD
---------------------------- --------------------
Frank D. Forward
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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